Offerings on the altar of greed

Probably no one has argued completely successfully that Australian businessmen are more likely to be confidence tricksters than other nationalities, although it’s nice to think we punch above our weight. And we can confidently say those who do offend are no more likely to end up behind bars.

There’s been ugly talk. London investment circles, any time since the 19th century, have bandied about that hurtful line that an Australian mine was really just a hole in the ground owned by a liar.

That sort of language really doesn’t help anyone. It’s probably true that the successive waves of foreign investment into Australia over the decades (often resulting in total loss for the hapless foreigners) should be seen not so much as investments, but more as foreign aid, as TheAustralian Financial Review helpfully suggested after the 1987 market crash. It’s character building.

In chronicling 60 years of business failures and follies along with the successes, the Financial Review has pioneered the unique form that is Australian business journalism.

It’s said that British financial journalists are best at explaining how a deal is done, while their American counterparts will focus more on why a deal is done. Australia happily can focus on how a deal was done and why no one went to prison.

Australian business is self- cleansing. Once a decade, the system overloads, the economy tanks, and the wave of corporate collapses triggers royal commissions, liquidator’s hearings, legal cases, investigations, prosecutions and mountains of paperwork that were never meant to see the light of day.

The entrails of Australia’s riskier businesses are exposed, and everyone agrees that this is a terrible thing that will never, ever happen again. It’s all most satisfactory.

The GFC (global financial crisis) offered pitifully few of these breathless revelations – much of the bank action took place behind closed doors, which was perhaps a little disappointing, although Europe and the US seem to be having another stab at a global meltdown.

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It’s important to note that there is nothing necessarily wrong with going broke. Poor judgment is not a crime. However, those who are running out of money often have a natural reticence in telling shareholders and creditors this.

How they manage this coyness is a recurring wonder. It’s surely why God created accountants.

Where did it begin? Certainly long before H.G. Palmer (Consolidated), the electrical retailer, floated in 1950, less than a year before the launch of the Financial Review. It’s said Palmer never made a real profit, yet it paddled along happily for 15 years of debt-funded expansion until it went spectacularly bust in 1965, owing the equivalent in today’s money of more than $1 billion.

That was the prelude to the 1968 mining boom that set the stage for modern Australian business and gave a solid grounding for so many corporate leaders and deserving scallywags – and a fresh range of collapses with Poseidon, Minsec and Patrick Partners.

Two factors determined the debacles that followed. First, Australian business had always had two sides. On the one hand was the conventional establishment – conservative, subdued and incurably smug, an elaborate ecosystem of insiders, where power was marked by directorships on the big boards, the banks and finance companies, as well as institutions such as the Melbourne Club.

But there had always been a group of outsiders, often found in the spec mining boards but who would congregate with lightning speed around any new source of money. Some had some novel ideas about real estate. They were unorthodox, brash and disrespectful, but they made terrific lunch companions.

The late 1960s gave the Financial Review’s most famous columnist, Trevor Sykes, a solid introduction to the cast of characters who would feature in his Pierpont column and eight books, including the textbook history of unhappy endings, Two Centuries of Panic.

In 1970, Rene Rivkin was finishing his articles in a solicitor’s office (his mother would circle the block to drive him on errands) before his father bought him a broking licence. He and his father both opened Swiss bank accounts with the proceeds from the first float.

Trevor Kennedy was Melbourne editor of the Financial Review, while Christopher Skase was another hire in the 1970s, working for Sykes.

Alan Bond in Perth had proven to have a talent for selling house blocks. So had George Herscu in Sydney . . . the list of nouveau money was long.

In the 1970s, the breakdown of the Bretton Woods monetary agreement, US inflation from funding the Vietnam War and the 1973 oil shock changed everything. The share and property markets rose, then collapsed, rose again, then dived.

The building societies and finance companies were the chief victims of the property crashes – in the process cutting the range of junior board seats that had formed a key part of the establishment (the state banks would go a decade later).

The entry of foreign banks in the ’80s provided what seemed a limitless supply of credit for the bold and intrepid. The establishment was candy.

The outsiders were triumphant– John Elliott at Elders and Robert Holmes à Court almost taking over BHP; John Spalvins in Adelaide buying David Jones and turning a tug company into the most complex company structure; Laurie Connell doing his bit for Perth property values and political donations.

It’s said that Bruce Judge tapped almost every major wealth source in New Zealand in the rise and fall of Judge Corporation and Ariadne.

The new boys even had their own arbitrators – former Financial Review editors Deborah Light and Colleen Ryan revealed the secret network of “archbishops": senior business figures called in to preside over private and illegal business agreements. FAI founder Larry Adler was allegedly one of them.

It all ended badly, but that was never the intention.

As Bond Corporation’s cash flow dried up, Alan Bond stripped close to $1 billion from Bell Resources, but he wasn’t stealing the money, as the courts later found, because he always intended to return it.

Brian Yuill at Spedley Group no doubt had the same noble thought.

The 1987 sharemarket crash followed by the 1990-91 recession wiped out almost all of the new boys. Bond, Yuill and Connell went to prison and Skase went to Majorca.

Rivkin went on to pioneer the new side of corporate crime – smaller but perfectly formed – a $52 million insurance windfall for his Offset Alpine business. It turned out almost half the shares were owned by mystery investors in Zurich – who he later revealed to be himself, Trevor Kennedy and former cabinet minister Graham Richardson.

Ray Williams and Rodney Adler did time after HIH crashed. Recent weeks have seen three executives of the Opes Prime stock lending business convicted, while Trio Capital fund spruiker Shawn Richard was sentenced to two years and six months for his part in a $26 million fraud.

Once again it was Rene Rivkin who had picked the trend. Corporate empires might be in abeyance, but retail investors are always a peach for the plucking.